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Microfinance

Background information on micro financing and the advantages and disadvantages.

Photo of DeletedUser
4 3

Written by DeletedUser

Advantages 
Provides financial access to people who are poverty 
microfinacing is profitable 
Empowers women 
Breaks poverty cycle 

Disadvantages 
Difficult to manage with poor administration
Interest rates are not much lower than money lenders 
Doesnt provide skills or training 

Alternatives
Self help women groups who collectively take loans from mainstream banks
Gonverment subsidies bank interests in India

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Photo of Johan Löfström

the interest rates could be of different levels for different micro-credit-org's. even modified within a single lender-program depending on circumstances.

so that is a prejudice that is hanging around from the early start-up-days of this type of system.

and any smart money lender would be extremely motivated to add on some type of mentoring/advice central to help with guiding the borrowers to proper info or education, to help them become more successful at their home-farm or entrepreneurial endeavors.

Of course it is desirable to make them pay back their loans as quickly as possible so it can go on to be lent to new applicants.

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DeletedUser

Thanks Johan for your feedback. Yeah micro credit schemes are great as longs as they are conducted by social business. I just thought it was a balanced argument and showed some critical points about the financial framework. I suppose as they have been shown to be profitable they may have been exploited in some cases. I suppose i was just trying to portray that there are some costs and dangers behind the micro credit and that there are other alternatives.

Photo of Johan Löfström

i totally agree with trying to highlight all aspects!

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